The downtown San Diego Borders closed in early 2011 after the bookstore chain filed for bankruptcy.
— K.C. Alfred

A Brazilian steakhouse, part of a nationwide chain, will be the first of several new tenants to occupy the cavernous downtown San Diego space where a Borders bookstore formerly operated.

Fogo de Chao, an upscale Brazilian Churrascaria-style steakhouse, has signed a 10-year, $4.9 million lease for much of the first floor of the 33,000-square-foot Gaslamp Quarter building that has been vacant since Borders closed early last year.

The restaurant, which will be the second Fogo de Chao operating in California -- is likely to open sometime during the first quarter of next year, said Bill Shrader, senior director with Cushman & Wakefield's Urban Property Group, which brokered the deal.

Over the next several months, the building owner, Monro Capital Fund I, LP, will spend $1 million to subdivide the two-story building at Sixth Avenue and G Street into separate spaces to accommodate multiple tenants, Shrader said. While most of the first level will be occupied by restaurant uses, there is room for a smaller retail store, he added.

Still to be leased is the 16,000-square-foot second floor, which has attracted considerable interest from both prospective entertainment and office users, Shrader said. Borders had occupied the entire glass and brick building, but it closed its doors after the bookstore chain filed for bankruptcy in February of last year.

"It hasn't been challenging getting tenants for the space due to its visibility and location on a prime corner," he noted. "What's been challenging is how to put the pieces of the puzzle together because different tenants have different requirements."

Initially, the building owner and its brokers were not envisioning entertainment-type uses for the second floor but reconsidered after being inundated with interest from nightclub operators. Still, there are considerable hurdles to overcome, Shrader said.

"The challenge is, can they be permitted, given structural and noise issues," he said. "We're checking into that. We're finding it's a challenging issue to create enough exiting for all the (nightclub) users.

"If it's a pure nightclub, it will be challenging; if it's a nightclub with a food component, it's not as big of an issue."

Also available on the ground floor is a 2,500-square-foot restaurant space fronting Sixth that includes an outdoor patio. Shrader said Cushman & Wakefield hopes to have the building fully leased by the end of March of next year.